Also, the reasons for not making launches cheaper has been "why is it important to make launches cheap? Isn't the total cost dominated by the cost of the satellite anyway?"
Also, ground processing and all can get very expensive because it requires so many people and clean rooms etc and can be delayed. It depends if you think it's part of the satellite or the launch cost.
Overall you need to start somewhere if you want cheaper spaceflight. If there are cheaper satellites, then that's a big incentive for developing cheaper means of launching (and launching much more often too!).
It's partly a chicken and egg style thing. Launches are extremely expensive and far between and the big standing armies and facilities sit unused but have to be trained, maintained and paid. It's hard to break that circle, but it will be done, probably through some totally new technology that is first seen as just toys.
It cost's over 20k to launch a Cubesat it often costs far less than that to build them. Build costs and R&D can be hard to separate, but the replacement costs for many generic satellites are often well below the launch costs.
Check out the pics on the side - they're using a balloon, I don't know if that gets it all the way there but hobbyists do it - one of the more popular hn'ers does it and has blogged about it a but but I forget who.
"Three NASA PhoneSats systems (two PhoneSat 1.0's and one PhoneSat 2.0) are scheduled to launch aboard the maiden flight of Orbital Sciences Corporation's Antares rocket from NASA's Wallops Flight Facility at Wallops Island, Va., later this year. "
None of this is about orbit. Orbit == high velocity and altitude. Although high-altitude balloons regularly go about 40km that's still in the stratosphere and nowhere near space and the velocity is nowhere near what's needed.
These phone-based cubesats are a good idea. There have been plenty of phone-based balloon flights and there's no reason not to use them in satellites if you have some way of recognizing failure because of cosmic rays.
Don't sell yourself and other high-altitude-ballooners short—40km is almost halfway to space and is an amazing achievement.
Remember, everyone, space isn't that far away—if they put in a highway, you could drive there in about an hour. It's easy to think about space being very far away from us and untouchable, but it's actually quite close and just out of our reach. Keep reaching, fellow humans.
I imagine that part of the benefit to making small satellites is the ability to deploy a lot of them. Also, it's a good PR move when public perception is that NASA is bloated and wasteful. (Please, nobody give your opinion for or against that; I don't care :P)
I think it's important to make everything cheaper, even if you do get the most bang for your buck from reducing the cost of launch.
The other advantage in having NASA lead the way in the cheap satellite area, it will be easier for others to take advantage of cheap launches when they are eventually available. And possibly help create demand.
Space is a unique and unusual place. Usually the stuff that goes up there is also unique and unusual (hyperspectral radiometers, synthetic aperture radars, rovers). So it's expensive to engineer.
The cubesats (this is one) were developed as a way to prototype ideas and to get a larger segment of people involved in space activity. They are squeezed in to other launches. They're a very special case.
The phenomenon of cheaper, experimental missions is fractal. There are technology demonstration missions at many different price points (up to the 100s of millions of dollar range) that may have fairly modest science goals, but they're trying to show that some exotic bit(s) of tech (autonomous landing, laser communications) can work in space.
They are tiny as well, so in one launch you could put a LOT of them up there! For some kinds of operations, it's better to aim for 95% reliability and put quite a few in orbit, than to go to the expense of 99% reliability.
When I think of cell phones in orbit, the thought which comes to mind is "space junk." Putting lots of small objects in orbit cheaply sounds like a good way to increase the odds of something big, expensive, and possibly manned suffering a catastrophic collision.
Sorry if I'm being too nitpicky here, but NASA isn't actually innovating on size, here. They're putting everything in the standard 10cm^3 cubesat envelope. And they can fit a whole lot more than 10 satellites in the mass+volume of a typical one. And they can basically stow away on a rocket whose primary mission is one of those larger satellites.
